IBM Grabs HP's Toys

Like kids wrestling over colorful -- but very, very expensive -- building blocks, IBM Corp. (NYSE: IBM) has snatched The Lego Group from Hewlett-Packard Co. (NYSE: HPQ) and has no intention of sharing.

Big Blue announced today that it has reached a deal to run the Danish toy giants entire computing infrastructure, including its data storage -- a job that previously belonged to HP (see Lego Stacks IBM Sharks).

IBM did not disclose how much it’s making off the multiyear agreement, although it’s bound to be quite a large chunk of cash. The deal calls for IBM to replace more than 220 various types of HP servers with 30 of its own, and install four IBM Enterprise Storage Server (a.k.a. Shark) systems as well as its Tivoli Storage Manager software.

"Lego’s now a key customer of ours, and we’re pretty excited about their business," says Jeff Benck, director of product marketing for IBM’s eServer xSeries and BladeCenter systems. "This deal involves several of our product lines."

In addition to the four Shark storage systems, Lego will deploy two IBM eServer pSeries p690s; four pSeries p650s; and 24 sServer xSeries x440s [ed. note: batteries not included, some assembly required, Sam Palmisano action figure sold separately]."This is a pretty interesting customer win for IBM," says Charles King, an analyst with The Sageza Group Inc. "In the last couple of years, it’s fairly unusual to see a rip-and-replace deal like this. Of course, I guess the timing of the announcement couldn’t have anything to do with the beginning of HP World [conference] today."

So, why did Lego decide to make the leap of faith from HP to IBM? The toy company didn’t return calls by press-time. King says that IBM’s storage offering, while perhaps not the dealmaker, probably made a significant difference.

"I think that IBM can make the argument that since they’re making most of their storage products in house, they come out with better integration with their other products," he says. "And from a pricing standpoint, they probably have more flexibility with their homegrown stuff than HP has with its OEMed products."

In addition to certain schadenfreude at snatching a giant customer away from archrival HP, IBM is also able to tout the Lego deal as one of its biggest successes for its computing on-demand initiative. This approach will allow Lego to only pay for the computing and storage capacity it needs, IBM says. The toy company will be able to beef up its computing power during peak business periods, like the holiday seasons, and reduce it -- and the overall price tag -- at times when business is slower.

An HP spokeswoman, regarding losing Lego to IBM, says: "We win some, they win some. For example, we just beat IBM on an even bigger enterprise deal with the China State Tax Authority involving 60 Unix servers, of which 40 were Superdome."— Eugénie Larson, Senior Editor, Byte and Switch